The UN Global Sustainable Development Report (GSDR) 2019, out in September, is the latest significant international science-based synthesis report to call for an urgent transformation of current socio-environmental-economic systems. The report draws on recent advances in the natural sciences and maintains that the negative trends in climate change and biodiversity loss presage the crossing of ecosystem tipping points, which would lead to dramatic and irreversible changes in the conditions of the Earth system. According to the report, redirecting these trends requires a profound and intentional departure from business as usual.

BIOS Research Unit was invited to draft a background document on the transformation of the economy to feed in to the work of the Independent Group of Scientists (IGS) responsible for the GSDR 2019. Published already last year, well ahead of the final GSDR 2019, our background document attracted considerable media attention, with titles like “We Cannot Fight Climate Change with Capitalism, Says Report” (HuffPost, August 31, 2018).

Our starting point was that no economic theory has been specifically developed to deal with the socio-ecological situation we are in, but governments can draw on a range of frameworks and tools developed in the heterodox schools of economics. The frameworks and tools help governments to make sense of the situation and to unleash the potential of the existing political-economic system to achieve the necessary transformations in economic infrastructure and practices.

Therein lies the reversal of the currently dominant political-economic logic: rather than society being shaped to serve the economy’s abstract goals of growth and competitiveness, society now needs the economy to realize key transformations in the ways in which things are being sourced, produced, transported, used, and recycled. To achieve radical reductions in climate emissions and natural resource use, societies need to start by figuring out the concrete tasks that the economy must complete within the next two to three decades. In essence, the economy must develop and take into use systems of electricity, heating/cooling, food, transportation, and housing that do not rely on the continued use of fossil fuels or other sources of greenhouse gas emissions (biofuels have sometimes been suggested as a fossil fuel replacement, but their potential to actually reduce greenhouse gases in the atmosphere is negligible).

Government is the only entity with the legitimacy and the capacity to envision, coordinate and fund such systemic changes. The situation is similar to an era of post-war reconstruction, with urgent and intentional collective action needed, but this time disconnecting – not locking in – fossil fuel use from societies’ basic infrastructure. Our name for the transformation needed now is ecological reconstruction. The fossil fuel infrastructure is not physically in ruins (not everywhere, anyhow), but we need to stop using it and build something new.

Mainstream economic thought has long resisted such collective action, arguing for minimal government intervention into markets and highlighting the goal of a balanced budget. Heterodox economic scholars, particularly post-Keynesians and modern monetary theorists, do not share these core ideas. Post-Keynesians maintain that government can and should always guide markets toward social and ecological goals. Modern monetary theorists have shown that economically sovereign governments or monetary unions, such as the US or the eurozone, can always finance spending in their own currency. What societies can do is ultimately not dependent on money but natural resources, technology, knowledge, and political capabilities.

Interestingly, recent economic developments in the real world – especially unconventional central bank measures such as quantitative easing and negative interest rates – have come to challenge conventional economic thinking. More and more economists are beginning to share the thought that monetary policy is not enough: governments must have more active fiscal policies to keep economies running somewhat normally. They need to invest and spend more.

This is where multidisciplinary and cross-sectoral understanding comes along. Where to invest? Considering that societies have only two to three decades to radically reduce their climate emissions to avoid catastrophic ecosystem tipping points, all major infrastructure systems now being planned need to be low-carbon, and the systems must be compatible with each other. For instance, a policy of supporting biofuels is a no-go in relation to an automobile industry producing electric cars. There will also be significant tradeoffs: how much low-carbon electricity will there be, and how much of it will be available for transport, how much for heating, and how much for producing low-carbon steel.

The GSDR 2019, too, points towards this direction, but puts its words rather mildly. The report’s call to action is: “Governments, international organizations and the private sector should work to encourage investment that is more strongly aligned to longer-term sustainability pathways and to facilitate disinvestment away from pathways that are less sustainable.“

We should be more direct. It seems that governments are finally getting rid of conventional economic thinking that has resisted any kind of collective action toward building sustainable infrastructure and practices. Central banks have shown that money is no object. One of the highest remaining hurdles right now is building roadmaps across economic sectors. What exactly needs to happen before societies have low-carbon infrastructure in place? What are the cross-sectoral linkages? What are the social, technological or natural resource related bottlenecks? These questions cannot be answered universally but need to be tackled everywhere at the same time. Governments, it is time to call the change makers together and do some serious planning.

BIOS is an independent, multidisciplinary research unit which studies the effects of environmental and resource factors on Finnish society and develops the anticipatory skills of citizens and decision-makers. BIOS is part of the WISE consortium, funded by the Strategic Research Council at the Academy of Finland, aiming to improve decision making over wicked socio-environmental disruptions.

This blog post gives the views of its author(s), not the position of LSE Business Review or the London School of Economics.

Paavo Järvensivu is a researcher of economic culture, working at the multidisciplinary BIOS Research Unit, based in Helsinki, Finland. He is also a board member in the University of the Arts Helsinki (2018-). Since finishing his PhD in organisational cultures at the Aalto University School of Economics in 2010, he has engaged in transdisciplinary projects with artists, philosophers and natural and social scientists in order to construct cultural, economic and political solutions to the ever-deepening global environmental crisis.

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